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Why Some See A 16% Return In Sherwin-Williams Shares In A Year's Time

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Why Some See A 16% Return In Sherwin-Williams Shares In A Year's Time

Following Sherwin-Williams Co (NYSE: SHW)'s acquisition of The Valspar Corp, Citi resumed coverage of the former at a Buy, with a $410 price target. The price target represents a 16 percent upside from the $354.75 at which the stock closed on Thursday.

Analysts PJ Juvekar and Daniel Jester attributed the optimism to the company's transformation into a far more diversified portfolio of paints and industrial coatings, with a much more global footprint.

Additionally, the analysts believe the company is maintaining an outsized exposure to the positive trends in the U.S. housing market.

Citi thinks around 50 percent of pro forma sales would come from architectural paints, including the company's crown jewel Paint Stores and a far bigger position in DIY coatings at Lowe's Companies, Inc. (NYSE: LOW).

With professional paint market dynamics remaining favorable, the firm noted that Sherwin-Williams is growing two times the industry.

The firm believes the Valspar transaction broadens the depth and breadth for the company's industrial coatings, providing revenue synergy opportunities.

"SHW is targeting $320 multimillion of cost savings by 2019, or 2 percent of PF revenues, which in our view is conservative," the firm said.

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